Can we cure housing market boom and bust?

They make three suggestions – none of them exactly original, though the council tax suggestion, as they concede, would be “controversial and far-reaching.”

Bubble

There’s no denying that their proposals would have an impact, but will any of this ever happen?

Well, the current government seem to have pretty much followed Labour in focussing on supply and have not, to my knowledge, advanced any of the demand-side ideas (mortgage lending excepted) proposed by the report.

Why? Two words: political suicide.

The Proposals

1. Increase supply

2. Taxation and fiscal measures:

Switch from the ‘slab’ system of stamp duty to a ‘slice’ structure and upgrade the levels regularly.

Introduce credit controls such as temporary or permanent maximum loan-to-value ratios, to control the market

Reform council tax by moving towards a point value system based on a fixed percentage of property value; and make council tax a national property tax, under which revenues would rise and fall with property values, independently of the current Council Tax take, which is set to raise a fixed sum required to finance local services.

3. A better safety net to stop homeowners being burnt – this would include more responsible lending and borrowing and a partnership insurance model based on contributions from borrowers, lenders and the Government.

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An interesting report – but as you say, political suicide for the most part.

Stimulating development has been ventured into vaguely by the current government but as yet with no real effect.

Taxation is something that will always rile someone somewhere – so a bit of a no-win situation whatever the decision there unfortunately.

Borrowing and lending regulation is possibly the most sensible route in my opinion – much of the market is under the firm grasp of lenders at the moment – high LTV mortgages have caused no end of problems at almost every level – whilst the public can claim low understanding of the products and insufficient explanations – the banks really should take into account peoples ability to pay off a mortgage if interest rates, inflation and demand change.

Without house price stability, people cannot move, at times when they ordinarily would. We can see this clearly at present owing to market stagnation.
Worse, all the allied trades, including estate agents, are unable to trade successfully as the housing market goes into the doldrums, at approximately 7 year intervals.

The idea of owning your own home (rather then just renting it) is partly so that YOU can decide when you want to move, and where to. It’s also to enjoy a return on your investment, over time.
I would like to help large numbers of people, using my proposals, by creating a perfectly stable housing market that stays ’stable in throughput’, no matter what the rest of the economy is doing over time. This has never been achieved before but at Property Match (UK) we have discovered the correct formula to achieve this.

In essence, the estate agents past model, which is fatally flawed, has been to try and create a price stable market, with generally increasing asking prices.
The result, which we can all see, is massive house price growth followed by stagnation in demand as prices fall back.

By comparison, my idea instead is to have a market that is stable in throughput, but not prices. This means people can move between houses more easily, whatever the prevailing prices, because prices are, of course, always relative at any one point in time. Instead of using agent’s psyched-up prices, true market-driven prices, will generate a continually moving housing market and thus ability to change between houses quickly, in any state of the market.

In this model, prices will be capable of fluctuating even more than at present but because all prices will stay close to each other, relatively speaking, (like the Red Arrows flying in formation,) everything will work satisfactorily. Forward progress will be maintained at all times.

Additional advantages will become available, especially for first time buyers, as whenever prices are generally lower than usual, they will be able to get onto the housing ladder more easily.

For more information about this exciting new method to smooth the housing market, please read our earlier posts explaining the various aspects of this market-price model, for an all new private housing market in the UK.

More on how we think a turn-around in the housing market may be quickly achieved: